News

Monterey Peninsula desal project has two backup options

In case Cal Am project fails

By JIM JOHNSON Herald Staff Writer

Posted:
02/22/2013 06:29:51 PM PST

Updated:
02/25/2013 05:03:38 PM PST

Correction: State Water Board desalination expert John Steinbeck is not a member of the DeepWater Desal project management team. An earlier version of this story reported an inaccurate status for Steinbeck and the desal project. Steinbeck is vice president of Tenera Environmental, which conducted environmental impact studies related to the project proposal.

DeepWater Desal and the People's Moss Landing Desal Project will compete for the Monterey Peninsula Water Management District's support as a contingency project.

The district is looking for backup plans capable of providing a new water source for the Peninsula in case California American Water's proposed north Marina project is delayed or falls through.

Backers of the other two proposals, planned for sites across Dolan Road from each other in Moss Landing at the Dynegy power plant and the Moss Landing Commercial Park, were the only ones who submitted responses to the water district's request for qualifications.

The People's Project has a project development team that includes developer Don Chapin, a political heavyweight in Salinas; attorneys Paul Hart, George Schroeder and Cameron Wiest, who is named as bond counsel; and Nader Agha. The project no longer lists Don Lew of Concord-based JDL Development, who was announced as the project's senior managing director in December.

DeepWater Desal's project management team includes former state Public Utilities Commissioner John Bohn, state water board desal expert John Steinbeck (no relation to the late author) and Brent Constantz.

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State water board desal expert John Steinbeck (no relation to the late author), who is vice president of Tenera Environmental, which conducted environmental impact studies related to the project proposal, is not a member of the project management team.

District General Manager Dave Stoldt said five requests for qualifications were sent Jan. 24. The Marina Coast Water District sent a letter indicating it wouldn't be submitting a proposal. Stoldt said he presumed "upheaval" at Marina Coast precluded any collaboration with the Peninsula district.

One request was sent to Lew, but he didn't submit a reply. Stoldt said that wasn't surprising because the district looked into his claims that he owned the rights to the Moss Landing business park site and it turned out to be false. It became clear, Stoldt said, Lew was struggling to get financing for the deal and wasn't a legitimate option.

Lew is out of the picture now, Stoldt said.

Stoldt said the fifth request was sent to financial institutions that control the loans on Moss Landing Commercial Park, which he said expressed interest in the desal process in case the property changed hands.

District officials decided in December to solicit contingency projects because of the uncertainty of Cal Am's plans to draw desal plant feeder water from the overdrafted Salinas Valley groundwater basin, and because of the potential for lengthy and expensive litigation that could delay the project. The district board approved spending up to $500,000 a year during the next two years on the quest.

DeepWater Desal and the People's Project previously competed with Cal Am's project for support from the Peninsula mayors' water authority. But after months of comparison study, the authority decided to withhold its support from all three projects while preparing a list of eight conditions that Cal Am would be required to meet to earn the mayors' formal backing. The Board of Supervisors and the water district board unanimously supported the authority's conditions on the Cal Am project.

Stoldt said the proposals still leave "a lot of questions" unanswered. DeepWater's project assets are contractual without long-term guarantees, while the People's Project's proposal is not fully developed, he said. Questions remain about the commercial park site's future because of what Stoldt said was Agha's "failure to perform" on the property loans.

DeepWater proposal

DeepWater Desal's proposal, dubbed the Central Coast Regional Water Project, calls for creating a public-private partnership charged with paying for, and eventually owning and operating, a desal plant capable of delivering 10,000 acre-feet per year of potable water for the Peninsula. The partnership would include a single public agency or a new joint powers authority of public agencies.

The plant would be the first phase of a larger plant that would produce 25,000 acre-feet of water for regional water needs.

The plant would pump water from deep below the surface of Monterey Bay through an existing pipeline easement to avoid trapping tiny ocean organisms.

The plan calls for the firm to execute the design and build phases of the plant as project developer on behalf of a public agency or joint powers agency, which would issue tax-free bonds to pay for the project based on the terms of a negotiated water purchase agreement. The firm would be paid for operating the plant on an initial basis.

The proposal estimates a need for about $5.2 million for permitting, preliminary design and legal work prior to public financing. Environmental costs would be covered by the water district and the firm would be reimbursed for certain project costs along with a "reasonable fee."

The firm has a five-year exclusive negotiating agreement with Dynegy for land and improvements on the proposed plant site. Its plans call for locating a digital data storage center at the site and purchasing power through a municipal power utility to be established by the city of Salinas.

People's Project

The People's Project proposal calls for Moss Landing Commercial Park LLC to design and build a $75.5 million desal plant on about 25 acres at the 200-acre business park site. It would rely on existing infrastructure, including pipelines and easements.

According to the plan, the desal plant would be capable of producing up to 11,200 acre-feet of potable water a year.

The plan would require the water management district to purchase the desal plant site for $25 million or sign a 50-year lease with a 49-year option including terms to be negotiated. The project developer would promise to consider deferring acquisition costs until bonds are sold to finance the project.

The project developer would cover $700,000 in environmental review and engineering costs, to be reimbursed through project bond funding, as well as free rent at the site until the plant starts producing and revenue is generated.

Preliminary design would take an estimated three to five months, starting in the next few months, said the proposal, and environmental review and permitting would be finished within 18 months. The proposal said a lead agency for the environmental review is still being identified, raising questions about the status of a previous agreement with the city of Pacific Grove.

In the proposal, Agha says the project site was previously identified by the PUC and Moss Landing Marine Laboratories as the best apparent site for a desal plant.

Jim Johnson can be reached at 753-6753 or jjohnson@montereyherald.com.